We are fortunate that the dental industry, as part of general healthcare, is somewhat insulated from mild or medium-level economic stress. We have often said that our industry perhaps doesn’t grow in the double digits of some other industries but also when it declines if doesn’t fall far. History shows that 6% growth can be a good growth year and 3% would be in a floor. It appears that in 2009 we will test this low range.

The final challenge that needs to be mentioned is maintaining employee motivation. As unemployment levels grow, the fear level of your employees increases. In this situation, you must keep the employee feeling that they are part of the solution. They need clear goals, and they need to understand the upside and also the downside. So how do you do this? The answer is to use the most proven and often underused management tool—communication. Increased dialogue with the employees will increase their effectiveness and value to you and your business.

In recessionary times, there is less discretionary income and people are reluctant to spend money when not necessary. As a result, they are likely to postpone treatment, if possible. We believe basic restorative work, preventive, and other day-to-day procedures will continue unabated, but discretionary spending (e.g., teeth-whitening and other purely cosmetic dentistry) will suffer. For the majority of Americans, reduced discretionary spending and higher patient deductibles will translate into a decrease in the number of crowns and bridges placed, especially complex cases involving implants.

To cope with the lower volume of work while still facing the same high fixed costs, dental offices and dental laboratories will be compelled to do things differently to survive. They will be challenged to redefine their roles and discover higher profit margins and smarter procedures, technologies, and products. Automation, CAD/CAM applications, and global outsourcing are ways to reduce costs and improve quality, while standardizing processes with predictable end results. We may see these business segments snowball in 2009 as a side effect of the economic slowdown.

A second challenge is to remain focused. All the difficult economic news and advice may lead to confusion. Dentists and laboratories can’t be all things to all customers. Therefore, they should know their customer base and remain focused on their core strengths and activities.

A third challenge will be to retain a client base. In a tough economic market, customer satisfaction is paramount. Remember, the competition is looking everywhere for new customers. Make sure you strengthen the relationship with your customers by paying more attention to customer service and retention strategy. Now also is a good time to gain new customers, particularly those who have lost their vendor or are shopping for new options that provide improved services and efficiencies.

The dental economy is fundamentally more stable than the broader global economy, but still I think we will see a slight downturn in dentistry, particularly in the U.S. and Europe. When you look at the growth rate for global dentistry in 2009 and 2010, I expect this business sector to realize a much softer rate of growth than the 6% to 7% average we have been experiencing.

Needs-based dentistry in developed markets comprises 90% of the dental market, while cosmetic, or want-based dentistry, makes up a mere 10%. The want-based segment of the dental business, which encompasses the purely cosmetic procedures, orthodontics, and full-mouth reconstructions, we believe, will suffer a slowdown in the coming year. Needs-based dentistry, when you consider the sheer number of teeth per person, will keep growing.

We also believe the void of good investment opportunities in the general market makes 2009 the ideal time to invest in your business. Investing in making your practice or laboratory more productive and efficient for the long term positions your business for the subsequent economic upturn. Our core message is that despite the challenges, this is a good time to invest in productivity-enhancing technologies that increase your competitiveness. Companies that grow during an economic downturn tend to perform stronger when the economy turns around. We believe the CEREC Connect business will grow significantly this year. We expect the number of laboratories currently signed up to double in 2009 with our launch of 3D printed models, which will allow laboratories to do any type of dentistry using digital impressions, CEREC Connect, and CAD/CAM technology.

Basic bread-and-butter dentistry should also remain stable. However, the elective and higher-end procedures, such as cosmetic implant or crown and bridge reconstructions, will likely be impacted. Because the U.S. market tends to have a larger percentage of elective procedures paid out of pocket, we certainly should expect to see a slowing in these procedures, which should directly impact dental labs.

As to the domestic CAD/CAM business, we would expect some slowing in equipment—although that’s a debatable topic depending on who you talk to. The CAD/CAM materials outsourcing business should still see growth. While I don’t think the market will see the 20+% that we’ve seen over the past few years, I’m still optimistic about this business segment.

On the dental lab side, I think businesses that traditionally run on very tight margins and have been stretching accounts payables will be challenged to stay in business. For other laboratories, the challenge will lie with preparing for the future by investing in and integrating new technologies. Dental offices and laboratories that can improve their productivity and workflow have a huge opportunity to position themselves for increased case volume when the economy does turn around.

Laboratories should take the opportunity during this slowdown to reexamine both their business processes and business model. The laboratory industry is one of the last to really embrace industrial engineering concepts for operational efficiency, and there are some major cost- and time-savings opportunities here.

What is key now, is that labs focus attention on the strong, core aspects of their business. There are opportunities to streamline and concentrate on the most profitable aspects of the business.

That said, one of the biggest challenges right now is access to capital. Investing in big-ticket items is going to be difficult for some dental businesses. But the exciting news for medium-size labs is they can be competitive and get into the digital workflow arena in different cost-effective ways.

For smaller businesses that want to prepare themselves for the future, we would guide them into completely outsourcing cases, or a move to more cost-effective scanning and software design technologies.